Return to The Green Energy Institute Home Page

Tuesday, April 21, 2015

RPS Repeal Efforts Are Deeply Misguided

By Nick Lawton, Staff Attorney

Texas and North Carolina have joined the fray over Renewable
Portfolio Standards, the popular and effective state requirements for renewable
energy. Bills in both states would rescind local RPS requirements. Although
Texas would suffer less from an RPS repeal than North Carolina, enacting either
bill would be a costly mistake. This post offers some details on the proposals
in these two states and then offers some broader context to explain why RPS
repeal efforts are bad public policy.

Is Texas Declaring
Victory or Snatching Defeat from its Jaws?

Texas enacted its RPS in 1999 and expanded the policy in
2005. The Texan RPS required the state’s utilities to purchase 5,880 MW of
renewable energy by 2015 and set an aspirational goal of 10,000 MW by 2025.
Since then, Texas has become the nation’s leader for wind energy development,
with more
than 14,000 MW already installed (more than twice the amount as in
California, the next runner up). Texas also has roughly 330 MW of solar power
installed. In short, Texas has wildly exceeded the most ambitious goal in
its RPS.

In some sense, the remarkable renewable energy development
in Texas lends credibility to the
argument from the bill’s sponsor, state Senator Troy Fraser (R-Horseshoe Bay),
and other backers that the RPS is no longer necessary. However, the RPS also
gave the state’s Public Utility Commission (PUC) greater authority to approve
new transmission lines in “Competitive
Renewable Energy Zones.” The new transmission lines connect the rich
renewable resources in west Texas to the metropolitan energy consumers in the
eastern parts of the state, and they have been extremely successful in spurring
the state’s wind energy development. If the state rescinds this authority, the
PUC will lose the ability to easily approve new transmission lines, thus
setting up a new obstacle for further renewable energy development. Similarly,
repealing the RPS sends a message to renewable energy developers that the state
lacks interest in their business, even at a time when renewable energy is poised to help the state comply with new federal pollution regulations at low cost. In the words of Tom Smith, director of Public Citizen, the legislature "snatched defeat from the jaws of victory." In other words, even though the state has already met the
goals of its RPS, the repeal would still stymie renewable energy development.

But more fundamentally, Texas’s situation raises the
question of what states should do once they meet, or surpass, their initial
renewable energy goals. The Texas Senate seems to think the appropriate
solution is to dust off their hands, declare victory, and end support for a
successful industry. But a better reaction to achieving one goal is to
set another, greater goal. Only by building off prior victories can states
continue to make progress. Wind power in Texas has already saved the state more
than $950
million annually and created more than 8,000 jobs. The state can realize
even greater savings and even greater benefits, but not by retracting
successful policies. The Texas House of Representatives should reject this RPS
repeal effort and instead launch new renewable energy goals for the state.

North Carolina
Proposes Backing Down from a Promising Policy

In contrast to Texas, North Carolina has not attained its
RPS targets and thus stands to suffer worse economic impacts from the repeal recently
proposed in the state House of Representatives. North Carolina became the
first state in the Southeast to enact an RPS in 2007, requiring the state’s
utilities to obtain 12.5% of their energy from renewable sources by 2021. But a
new bill in the House of Representatives would slash the target in half and end
the policy altogether in 2018. In effect, the new bill would end North
Carolina’s driving renewable energy policy.

One of the bill’s sponsors, Senator Chris Millis (R-Pender),
promotes the bill by arguing that the RPS transfers wealth from ratepayers to
the renewable energy industry. However, the RPS has already driven more than
$2.6 billion in investment in the state since 2008, and more than
three-quarters of that investment has gone to rural counties, which likely have
the greatest need for it.

Repealing North Carolina’s RPS would disrupt existing
investment and deter future investment by sending a signal that the state will
refuse to support the renewable energy industry. The state is already on track
to meet its targets, but slashing those targets would present a significant
obstacle to making further progress.

States that Meet RPS
Goals Thrive, but States that Abandon RPS Goals Suffer

Texas, North Carolina, and all the other states considering
RPS repeals should pay close attention to the demonstrable economic benefits from
achieving RPS targets and to the economic damage that repealing RPS targets can
wreak. The benefits are clear. California, which has a robust RPS and is
strongly considering an expansion, is seeing strong
economic returns, including sales of renewable energy to other states worth
$4
million just in the first two months of 2015.Meanwhile, in Virginia, compliance with that
state’s RPS has proven cheaper than the state’s utilities expected, leading Appalachian
Power to begin the process for offering its customers rebates, which would
be worth nearly $1 off each resident’s monthly energy bill, for a total rebate
of roughly $8 million.

In contrast, Ohio offers a good example of the economic
damage that RPS repeal efforts can wreak. In 2014, Ohio became the first state
to freeze its RPS, meaning that utilities no longer needed to invest in
renewables in order to comply with the law. Consequently, the value of
renewable energy credits, which utilities buy to demonstrate RPS compliance,
plummeted. The fallout has been harsh for the solar energy sector in Ohio.
According to one developer, Ohio’s solar companies “are
either going out of state or going out of business.” Those companies are
seeing rapid declines in profits and are shedding jobs. In short, Ohio backed
down from its RPS target, and its local businesses suffered.

In 2015, the states will have to be leaders in renewable
energy policy. Although Congress has focused
heavily on energy and the environment in the first 100 days, it has so far focused
on encouraging fossil fuel development and has failed to pass any significant
reforms. Meanwhile, the United States Environmental Protection Agency is very
likely to issue a final version of the Clean Power Plan this summer. Under that
rule, states will take leading roles in figuring out how to slash carbon
emissions from the energy sector. The states that have successful RPS programs
will have more experience driving renewable energy development and thus will be
better prepared to meet federal emissions targets. In contrast, the states that
are abandoning successful, efficient RPS policies are likely to have a harder
time.